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HOUSING

Money hacks: How to get the best deal on your mortgage in Sweden

Taking out a mortgage is a big commitment not only financially, but it also ties you more closely to both Sweden and anyone you're buying the property with. Here's our complete guide to understanding a Swedish mortgage.

Money hacks: How to get the best deal on your mortgage in Sweden
Taking that first step on the Swedish property ladder can be daunting, so here's what you need to know about mortgages in Sweden. Photo: Fredrik Sandberg/TT

How do mortgages work in Sweden?

Your mortgage is a long-term loan allowing you to buy a property – the Swedish word is bolån, literally meaning “living loan”. Because housing prices are high, it’s usual to put down a small amount of the total cost (your deposit or kontantinsats) and borrow the rest from a bank, which you pay back in agreed installments over several years. 

In Sweden, the first step of the process is getting a lånelöfte, literally a “loan promise”. You can do this either at the start of your house-hunt or when you’ve already got a specific property in mind that you’d like to buy.

It’s a good idea to do this early on in the process, because it can make it quicker to get the loan once you actually need the money, ensuring you don’t miss out on your dream apartment since the buying process is relatively fast-paced in Sweden. However, you should already have an idea of your budget when you apply for the lender’s note, because that will influence how much the bank will agree to lend. 

If you’ve still got questions on how the rest of the house- or apartment-hunting process works, check out our guides below first:

What do I need in order to get a mortgage in Sweden?

You’ll need a Swedish personnummer and proof of stable finances in Sweden, and you’ll be subject to a credit check. This means that you’ll usually need a history of employment and paying tax in Sweden, although some banks are more lenient than others when it comes to, for example, self-employed people or recent arrivals.

If you still have Swedish student loans to pay back, this will be taken into account when calculating your mortgage, however student loans in other countries are not usually factored in.


Photo: Fredrik Sandberg/TT

The exact amount you can borrow depends on how many of you are in the household, your income(s), what kind of employment you have (permanent is more secure), your deposit amount, any other loans you have, and how much your monthly fee (avgift) will be if you’ll be buying a property that belongs to a housing association (BRF) or the size of the home if you’ll be going for a detached house.

How can I get the best rate?

Your mortgage is very likely to be your single biggest household cost, so it’s worth shopping around to make a saving. Remember, even a small decrease in terms of percentage points could add up to thousands and thousands of kronor over time.

Using price comparison tools such as Compricer or Konsumenternas is a good start. Next, call up several of the banks which seem to offer the best deals; it’s a good idea to prepare for these calls by doing some sums beforehand, comparing the different deals on the market so you can pit them against their competitor and show them you know what you’re talking about.

Members of trade unions are offered discounts at several banks, so be sure to ask about this if you’re eligible, and some banks offer discounts on mortgage interest for certain types of homes, for example energy-efficient properties.

And there may be room to negotiate a better offer than the one offered online, especially if you set up a meeting or phone call. If you’re an existing customer at one bank but they haven’t offered the most competitive rate, it’s worth seeing if they’ll match the better rates you’ve found in exchange for you taking out your loan with them.

But watch out for offers that look attractive but come with hidden costs. For example, banks usually require that you have a current account with them in order to take out a mortgage there, so look out for any requirements such as expensive cards. Don’t forget to include any extras when calculating your monthly costs with different banks.

Make sure you know exactly how long any discount or reduced rate will apply for. Why not set a calendar reminder for this date, so you’ll be ready to renegotiate once the original offer expires? Either way, make sure you renegotiate your terms regularly so you’re confident you’re still getting the best deal.


Photo: Tomas Oneborg/SvD/TT

What do I need to know about joint mortgages?

If you’re buying with a partner, you’ll likely be sharing the mortgage. Remember that two people who live together as a couple in a shared household are given the legal status of sambo (cohabiting partners) in Sweden.

This means that any property you purchase together with the intention of sharing as a couple may be subject to 50:50 division in the event of a breakup, even if one partner paid a larger share of the deposit. Some couples choose to draw up a written contract (with assistance from a lawyer) which states what would happen if they split up.

Exactly how much do I need to pay?

When you buy a house in Sweden, you’ll usually need to pay a minimum of 15 percent of the total price as a deposit (kontantinsats), so the remaining amount will be covered by the mortgage. You’ll pay back a certain amount each month over a fixed length of time, often 25 years.

If your deposit is less than 15 percent, then your mortgage will be split into two different loans, including one that covers the cost up to 15 percent of the total price which will typically have a higher interest rate and a shorter term. 


Photo: Jessica Gow/Scanpix/TT

The rest of your mortgage might be fixed rate (bunden), where the interest rate is set for a longer time of up to ten years, or it could be variable (rörlig), which means it could change as often as every three months, depending on the interest rates at the time.

A fixed rate is usually higher to begin with, but you have the stability of knowing it won’t suddenly rise if overall interest rates go up. You can also hedge your bets by splitting between the two, so that part of your mortgage is fixed rate and the other part is variable.

If you have a variable rate, it’s usually possible to overpay the mortgage. If you’re in a stable financial position with no other loans or debts, this is worth considering in order to give yourself a buffer in case your finances change in future or interest rates rise, increasing your overall total cost.

We’ve talked about ensuring your interest rates are as low as possible by shopping around, but unlike in some countries it’s not possible in Sweden to pay only the interest each year. Since 2016, there’s a law that property owners must pay off at least two percent of the total loan each year, on top of interest, until a loan reaches at least 70 percent of the value of the property, then one percent until it reaches 50 percent. That means that if you put down a 50 percent deposit, you wouldn’t need to amortise (amortera) the loan at all.

The rule that property owners have to amortise was put on hold until August 2021 due to the coronavirus crisis, but returned in September 2021.

In any case, don’t forget that in addition to your mortgage or interest rate itself, you’ll also be paying a monthly avgift (fee) to the housing association (BRF) if your apartment or house belongs to one. This is calculated separately from the mortgage as it’s a deal between you and the BRF, not you and your bank, but don’t forget to factor it in when working out the level of mortgage you can afford.

How do taxes affect this?

Here’s the good news. Property owners in Sweden are eligible for a tax deduction which means you can reclaim 30 percent of the interest payments up to a total value of 100,000 kronor per year.

You can either get this back each month, giving you extra disposable income throughout the year (this option requires you to speak to your payroll department at work) or get it returned as part of your annual tax return.

What should I keep track of in the Swedish economy?

Sweden’s central bank predicts that the repo rate (the country’s key interest rate) will remain at zero until at least 2024. Historically banks have raised their rates in line with changes from the Riksbank, so this means that mortgage rates will likely remain low for several years.

This means that choosing a variable rate may be the best option at the moment, but it depends on your own preferences. Choosing fixed long-term interest rates are a way to protect yourself against unexpected rises in interest rates. But expert economists tend to advise against opting for a fixed interest rate on your mortgage, since a variable rate means you can take advantage of a competitive market.


Photo: Aline Lessner/imagebank.sweden.se

If you’re unsure about the best option for you, it could be worth speaking to a consumer adviser. And before you take out a mortgage, you should do some calculations to ensure you’d still be able to pay off the mortgage even if interest rates were to rise. It’s possible to do this by playing around on an online mortgage calculator, or speaking to your bank if you’re confused.

As well as following developments in the Swedish economy, it’s just as important to keep up to date with any changes to the financial state of your BRF. Most BRFs have loans themselves, which are typically higher for more recently built apartments, and the higher the loan, the more vulnerable the BRF is to national changes in the interest rate. 

If the BRF is doing well financially (bringing in plenty of money from the avgift to cover its costs), your avgift should stay relatively low and you may even be given some months’ free rent. But if the BRF starts to struggle (for example, if costly renovations are required) your avgift could go up.

This is completely separate from your mortgage, since that’s a repayment plan directly between you and your bank, but it does affect your total monthly housing costs.

Did you find this useful? Do you have more questions? Let us know.

Member comments

  1. Any more information on deposits less than 15 %? I went to my bank last week to ask and they told me 15 % is required. Are any other banks different?

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OPINION & ANALYSIS

OPINION: Sweden’s ‘historic investment’ has failed to solve the housing crisis

Five years after Sweden's government promised to solve the country's housing crisis with a "historic investment", things are as bad as ever, David Crouch argues. Radical action is needed.

OPINION: Sweden's 'historic investment' has failed to solve the housing crisis

Forced to move house 20 times in the past eight years, Maria’s situation was desperate. She and her daughter had arrived in Stockholm from Latin America in search of a better life. She found work, no problem – but housing was impossible.

“Sometimes I was paying 12,000kr in rent and it was very hard because I only had 15,000kr in monthly salary,” says Maria (not her real name). So she took a high-interest loan of 240,000kr and tried to bribe someone in the Housing Agency to get to the front of the queue for affordable housing.

But she was caught. Her fate is unknown. And she didn’t even get an apartment.

This recent story, in the excellent newspaper of the Tenants’ Association, sums up the problems facing people who move here to work. The market for rental accommodation is tight as a drum. Finding a home means competing with Swedes, but with all the disadvantages of being an outsider. So people find themselves pushed into short-term, insecure rental contracts at inflated prices.

It wasn’t supposed to be this way. Five years ago this month, the government announced a “historic investment in housing”, including subsidies for construction companies, easing restrictions on building permits, and making more land available.

The housing situation at the time was grim. Spotify had threatened to leave Sweden if things didn’t improve – how could the company attract skilled young people to a city where there was nowhere for them to live? More than half Stockholm’s population – 600,000 people – were in the queue for a coveted rental apartment, because strict regulation meant these rents were low. But it took as long as 20 years to get to the front of that queue.

The result was a thriving rental property black market, with large bribes changing hands. Many tenants exploited the situation by sub-letting their homes, or parts of them. “It is almost impossible for immigrants and new arrivals to penetrate this market – it is all about who you know and how much money you have,” said Billy McCormac, head of the Fastighetsägarna property association, in 2015.

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So what has been the outcome of the grand promises the government made five years ago? House-building at the time was already rising steadily, and it has continued to do so. Look around you in the big cities and you will see that new apartment blocks have sprung up here and there.

But we shouldn’t go only on appearances. To understand the reality, we need to look at some numbers.

The gap between demand for housing and the existing housing stock has indeed started to shrink. “As housing construction has gradually increased and population growth has begun to slow down, the gap has decreased since 2017,” Stockholm’s Housing Agency noted in December.

The Agency has broken records four years in a row for the number of rental homes it has provided. The proportion of young adults living independently has also increased somewhat, the Tenants’ Association found, probably due to the pace of construction.

But this smidgen of good news is outweighed by an avalanche of bad.

The average queuing time in 2021 for a Stockholm apartment was more than 9 years; for somewhere in the city centre you have to wait 18 years. Only 936 homes came with a waiting time of less than one year. More than three-quarters of a million people are now registered in the queue for housing – a big increase on five years ago.

The rate at which the housing shortage is shrinking is nowhere near fast enough to alleviate the huge accumulated demand.

Assuming that the current pace of construction can be maintained, it will be the end of this decade before any significant dent is made in the deficit of homes, according to Boverket – the Swedish National Board of Housing, Building and Planning. The current rate of construction is “only marginally more than the long-term need”, it says.

The challenge is even greater when it comes to producing affordable housing, Boverket says, especially for the young and those entering the housing market for the first time. Almost one in four young Swedes up to the age of 27 are forced to live at home – the second-highest figure since the measurements began.

There are already signs that housing construction is actually slowing down, owing to higher building material prices, rising interest rates and an incipient labour shortage. Construction prices rose by more than 8 percent last year, and there is concern in the industry that war in Ukraine will further affect costs, in turn slowing the pace of building.

There is another fly in the ointment, a consequence of the collapse of Sweden’s governing coalition in November. The new, minority administration was forced to adopt the opposition’s budget, which halted investment subsidies for house building, throwing the construction industry into confusion.

In short, the “Swedish model” for providing people with a roof over their heads is failing. The folkhemmet, or “people’s home”, has not enough homes for its people.

Swedes themselves understand this: in a survey last month, nine out of ten voters said they thought that politicians did not take the housing shortage seriously.

We have waited too long. It is time for fresh thinking and radical action to solve the housing crisis.

David Crouch is the author of Almost Perfekt: How Sweden Works and What Can We Learn From It. He is a freelance journalist and a lecturer in journalism at Gothenburg University

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